Intuitive formalism in contract.

INTRODUCTION I. CONTRACTS OF ADHESION AND THE NEW OLD DOCTRINALISM II. LAY PERCEPTIONS OF CONTRACT LAW A. Social Science as Legal Realism 1. Social Enforcement 2. Reciprocity and Fairness 3. Promise-keeping B. Doctrinalism and Realism in the Age of Boilerplate 1. Contracting is Signing on the Dotted Line 2. Contract Enforcement is Specific Enforcement of All the Terms. III. VIGNETTE STUDY: EFFECTS OF FORMALITY ON WILLINGNESS TO BREACH. IV. DISCUSSION AND IMPLICATIONS CONCLUSION. INTRODUCTION

This Article starts with the proposition that most American contracting is consumer contracting, posits that consumer contracting has particular and even peculiar doctrinal features, and concludes that these features dominate the lay understanding of contract law. Contracts of adhesion constitute the bulk of consumer experience with contract law. It is not hard to see that someone discerning the nature of contract law from a sample composed almost entirely of boilerplate terms and conditions would come quickly to the conclusion that contract law is highly formal.

Within the realm of potentially enforceable deals (i.e., those that are supported by consideration and not illegal or unconscionable), modern contract doctrine upholds agreements when the parties have objectively manifested assent. This is the contract law of the first-year Contracts course, and it is, more or less, why contracts existed in the cases Hadley v. Baxendale, (1) Hawkins v. McGee, (2) and Embry v. Hargadine, McKittrick Dry Goods Co. (3) These three canonical cases each involve oral manifestations of assent: respectively, the contracts are based on the carrier's promise that the crankshaft would be delivered by noon the next day; (4) the doctor's promise of a one-hundred percent good hand; (5) and the employer's response to his anxious employee, "You're alright. Go get your men out." (6) For everyone who knows the doctrine of assent, these are relatively easy cases for finding contracts, because the evidence suggests that the parties, in fact, communicated to each other their agreement. However, these cases might startle a large percentage of the nonattorney population, for the simple reason that they are oral and not written contracts.

What accounts for this misperception of contract law? Americans are not contract na'ifs. On the contrary, most people enter into numerous legally binding agreements every year, if not every month or week. These are the agreements we make with Amazon, PayPal, Comcast, Apple, AT&T, and Visa, to name a few--in other words, these are the contracts we enter into regularly as consumers. Consumer contracts share key features: they are formal, assent is memorialized (either by signature or by clicking "I agree"), parties neither negotiate nor read their terms, and they are almost universally enforceable and, when litigated, enforced. This is the contract law that individuals encounter every day.

As such, perhaps we should not be surprised that this is what most people think that contract law is. Emerging evidence indicates that most people think contracting means signing the paperwork and that contract law is about the form of consent rather than the content to which parties are consenting. (7) This "intuitive formalism" deserves our empirical and normative attention because it has real implications for how consumers behave in their deals and how they interact with their legal system.

This Article proceeds as follows. In Part I, I argue that the doctrines around contracts of adhesion have been impervious to the facts of our changing contractual culture and that we might think of them as a triumph of doctrinalism over realism. In Part II, I lay out the evidence for an intuitive formalism, a set of common assumptions that form contracts are good prototypes for what contract law is about more generally. In Part III, I present a new questionnaire study as part of a larger consideration of how formalist intuitions might affect consumer behavior.

CONTRACTS OF ADHESION AND THE NEW OLD DOCTRINALISM

The question of whether or not we are in the midst of a "doctrinal" moment is a complicated one, in part because the answer must first stipulate the doctrine being discussed. For example, the defenses to contract override the doctrinal core of contract formation, but they are, of course, doctrines themselves. If by Doctrinalism we mean rule-boundedness, even rigidity, then the duty to read form contracts is a prototypical case. Many contractual disputes involve tough calls in which the rule is not informative--much less decisive--leaving courts to work through difficult questions of equity. But the duty to read is different: contract doctrine takes the clear position that individuals are bound by the boilerplate terms within their consumer contracts whether they have read them or not. (8)

Like other areas of law, contract law makes assumptions about what its subjects are like--what they could have foreseen, what they probably meant by their terms, and which remedies they would have chosen had they specified. This makes some doctrines frustratingly indeterminate. For example, how can we decide with confidence what people mean by "chicken" (9) or whether they ought to know that a delayed delivery will result in a whole factory shutting down? (10) Perhaps for good reason, these kinds of reasoning-intensive problems are used to teach contract law, a forum in which the task at hand is largely about developing good legal judgment.

But some of the highest-stakes questions from a policy standpoint are clearly about unread boilerplate. The problem of fine print implicates doctrines that are remarkably resistant to realistic conceptions of human beings and their social worlds. Doctrine--and, indeed, Doctrinalism--is alive and well in the context of adhesive contracts. The enforceability of unread terms is applicable across the board, across contracts contexts, and with almost no exceptions. As Professors Ayres and Schwartz have put it, "The duty to read doctrine is contract law's analog to the assumption of risk doctrine in tort law. A buyer who could have read but did not assumes the risk of being bound by any unfavorable terms." (11) Whether or not a party had the ability to read a contract is essentially a theoretical inquiry, uninformed by evidence of bounded rationality or even the limited number of hours in a day.

Broadly speaking, the upshot for legal scholarship of cognitive psychology research is the realization that human cognition is a limited resource. (12) If this unassailable empirical reality has natural doctrinal implications for any area of private law, it is surely boilerplate. Comprehending fine print requires attention and high-level information processing. It is tempting to think that attention is an easy problem to solve, insofar as it is subject to the conscious will of the individual. Information processing abilities, on the other hand, may be constrained by lack of education or intellectual aptitude, factors not in the control of the reader. In fact, though, comprehensibility is a problem that has largely been addressed or, at the very least, could be addressed with some investment. In many contexts--informed consent, credit contracts, mortgage lending-contract language is calibrated to be readable by consumers with a junior high school education. (13) Generally speaking, the crux of an unexpectedly burdensome term is not a Williams vs. Walker-Thomas Furniture Co. situation of a dense, complicated text. (14) The bigger and more intractable problem in modern consumer contracting is attention. (15) It is usually true that parties could have paid attention to any particular clause or agreement--but it is not true that they could have attended to all of the available boilerplate, or at least not if they also had to conduct other life activities. As Professors Ben-Shahar and Schneider have argued so pointedly, disclosures and fine print confront us at every turn. (16) They are on the physical products we buy, the buildings we enter, the songs we download, the healthcare we consume, and every financial transaction we make.

In the meantime, there is widespread recognition of non-readership even within the doctrinal scholarship and commentary. Empirical studies and common sense tell us that non-readership is the state of the world. (17) The Restatement comments to section 211, for example, defend the duty to read by arguing the (surely empirical) proposition that although "customers do not in fact ordinarily understand or even read the standard terms ... they understand that they are assenting to the terms not read or not understood, subject to such limitations as the law may impose." (18)

The normative and practical implications of non-readership are deeply contested. A law and economics approach claims that as long as some consumers are attending to terms, firms will compete on terms and thus, terms will not be overly biased toward firms. (19) Even a traditional relational contracts argument would say that the fine print is irrelevant because the parties will be constrained by their preferences to remain on good terms with one another and to avoid negative reputation effects. (20) There are also theoretical justifications for enforcing unread terms in the context of very low-probability readership. Such arguments rest on the notion that as long as there is an opportunity to read, consumers may be understood to have consented to the risk of the terms. (21)

Naturally, this understanding of the consumer's obligation to discover terms has implications for the operation of the unconscionability doctrine--namely, that it rarely offers a solution to aggrieved consumers. Unexpected clauses embedded in lengthy boilerplate are routinely upheld, unless there is a legislative response. Take, for example, three terms: universal default clauses in credit card contracts, flood exclusions in Gulf Coast home insurance policies, and...